Today's trading action will likely be not much different from
what we saw on Monday when stocks hovered around the starting point
and not that far from the highpoint of the year set in April. But
it wouldn't take much to push stocks above the previous highs.
Whether stocks continue the impressively smooth gains of the last
few weeks or succumb to gravity would depend on answer to a
simple-looking question - what has been driving the uptrend? But
appearances could be deceiving as the answer to this question is
far from simple.
Not much has changed in recent weeks on the questions about the
international scene (Europe & China), so it seems reasonable to
look for the market driver on the home front. But is the market
pricing in an end to the Spring/early Summer economic soft patch
and a resumption of the 'muddle-through growth' in the 2% vicinity
in the back half of the year and beyond? Or has it already factored
in another round of quantitative easing from the Fed?
It has got to be an either/or proposition given the mutual
exclusivity of the two options. If it's the latter (the QE
scenario), then one can easily envision stocks losing ground in the
coming days as the Fed fails to meet the QE expectations. We may
not get more clarity on that front from Wednesday's minutes of the
last Fed meeting as some of the more healthier economic data
followed the last FOMC session. At a minimum, we will have to wait
for Bernanke's Jackson Hole speech later this month to get more
clarity on the Fed's latest thinking. But things will definitely be
a lot clearer by the time the Fed meets again in mid-September as
by then we will have the August non-farm payroll report in addition
to a host of other key economic readings.
In corporate news,
) came out with disappointing results this morning even as the
market continues to make sense of the new CEO appointment from
beyond the retail sector. Unlike Best Buy, quarterly results from
) were significantly better than expected after the close on
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